The Fed released an update on emergency borrowing on Thursday afternoon. It showed borrowing from the Bank Term Funding Program that was created at the outset of the crisis has quickly ballooned to $53.7 billion, up from $34.6 billion the week before.
The program was set up as a new source of funding for banks that might face depositor runs — that is, when depositors try to pull their money out of a certain bank at once out of fear that it is going to collapse.
Borrowing has also soared from the Fed’s discount window — its permanent program for lending to banks that might be having liquidity problems. While discount window borrowing shrunk from last week and is at about $110 billion, that number is still right at about the highest level it was at during the 2008 financial crisis, a sign the banking system is still reeling from the sudden collapse of SVB and subsequent fallout.
Some have criticized the federal government’s actions as a “bailout,” although the White House has argued that making all of SVB’s depositors whole, regardless of size, wasn’t a bailout because taxpayer funds were not used and the bank was allowed to fail.
One of the dissenting voices, Doug Holtz-Eakin, the director of the conservative think tank American Action Forum and the former director of the Congressional Budget Office, told the Washington Examiner last week that the creation of the Bank Term Funding Program, which offers up to one-year loans to banks at par, is also a sort of bailout.
“In particular, if you’re holding these long Treasurys that have lost their value, you can go to this Fed program, give them the Treasurys, and they will give you the face value as a loan,” Holtz-Eakin said. “So that’s essentially pumping in more than it’s worth at that moment, which is much like the classic bank bailout on a smaller scale.”